“Employing India: Guaranteeing Jobs for the Rural Poor”
Citation: Zepeda, E., S. McDonald, M. Panda and A. Ganesh-Kumar
with C. Sapkota. 2013. Employing India:
Guaranteeing Jobs for the Rural Poor. Carnegie
Endowment for International Peace, Washington D.C.
Summary:
INDIA’S RURAL
EMPLOYMENT GUARANTEE is a milestone in social policy and employment
creation. The Mahatma Gandhi National Rural Employment Guarantee Act was
mandated in 2005 to implement an ambitious, demand-driven employment-creation
program to benefit the rural poor through projects that improve agricultural
productivity and alleviate land degradation. Guaranteeing the right of rural
households to 100 days of unskilled manual work, the program’s size sets a
worldwide precedent. It has achieved impressive results, but the act continues
to pose immense design and management challenges.
IMPORTANT
FACTS
· India
faces persistent poverty and inequality despite burgeoning growth. Between 1988
and 2005 the country’s GDP almost tripled, but its poverty rate only decreased
by 30 percent, underscoring the need for poverty reduction policies.
· Under
the program, members of 50 million households worked a total of 2.5 billion
days in 2011.
· The
act looks to empower women, widen opportunities for marginalized population
groups, and reinvigorate community decision making bodies.
· The
program is meant to operate transparently and fight corruption, but corruption
has been seen in the act’s implementation.
KEY FINDINGS
· The
act is having a significant impact on the lives of the poor with rural wages
increasing, but its effectiveness varies according to activity and location.
· Simulations
using an economy-wide model indicate that the act has a positive macroeconomic
impact, leading to increases in GDP and trade.
· As
the program shifts purchasing power from the urban rich to the rural poor, the
structure of demand changes. Economic activity in agriculture, processed food,
and light manufacturing increases and activity in heavy manufacturing and
services declines. Likewise, the demand for unskilled labor in urban and
especially rural areas increases, while the demand for mainly urban skilled
labor decreases.
· Poor
households benefit from added employment opportunities, while high-income
households might suffer from weaker demand.
· The
act is likely increasing land productivity, which boosts GDP and opens the opportunity
to introduce incentives to investment while keeping tax rates constant.
· Given
India’s weak institutional setting, a new way of doing business is necessary to
implement the act’s detailed and ambitious procedures. Institutions must
solidify processes for making information transparently available, and
communities need to be involved in creating and managing projects.
· The
act is a work in progress that needs ongoing evaluation to fully succeed and
keep the corruption affecting the program’s implementation in check.